Going East
Investigating the installation market in the Czech Republic
Tim de Boer
Rijksuniversiteit Groningen
Going East
Investigating the installation market in the Czech Republic
Tim de Boer
Rijksuniversiteit Groningen
Faculty of Management and Organization May 2006
1st supervisor: mr. drs. H.A. Ritsema 2nd supervisor: drs. H.C. Stek
Supervisor at Walraven: dhr. J. Nijssen
©2006 Tim de Boer
The author is responsible for the content of this work: the author holds the copyrights of this work.
Jan van Walraven BV and the author hereby give permission for this publication to be placed in libraries for reference purposes. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means without the prior permission of Jan van Walraven BV and the author.
Preface
After five years of studying business administration, the last report is finally ready. In front of you is the report that is written as graduation thesis for the faculty of management and organisation at the University of
Groningen. The company Walraven offered me a great research subject. Conducting this research enabled me to put all the knowledge acquired from my study into practice.
The research at Walraven was really interesting. The assignment was to gain knowledge about the market in the Czech Republic, in order to create a better market position. Particularly interesting was the fact that it offered me to have a look at the market in the Czech Republic, which was really great.
I have learned a lot during the last period of my study. I would like to thank several persons that contributed to the research and learning process. First of all my supervisors at the University of Groningen, Mr. Drs. H.A.
Ritsema and Drs. H.C. Stek, for their critical feedback and useful comments. I also want to thank my supervisor at Walraven, Jerry Nijssen and all other persons who helped me find my way at the company. Off course also all people from Walraven in the Czech Republic who made the research possible and the experience in their country unforgettable.
I would like to thank all my friends, family and parents for their support during this research and during the rest of my study period.
Tim de Boer
Egmond, May 2006
Management Summary
This research has been executed for Jan van Walraven Holding B.V. The company is growing rapidly and expanding to many countries. The Czech Republic is one of these countries they expanded to some years ago.
Due to some changes on the market, the company still has a gap in the knowledge about this market. Creating and structuring knowledge was the main purpose for this research.
The research objective is formulated as follows:
‘Gain better understanding of the Czech market for pipe systems, in order to determine how value can be generated to the customers. In this way it should be possible to create a better market position.’
To achieve this objective, a research question for this research was formulated:
´What value must be delivered to the customers and in which way, in order to create a better market position?’
To answer the above question, it is divided into several sub-questions. This summary will be structurd by use of these questions.
1. Which environmental elements can have an influence on improving the market position?
a.) What kind of influences does the joining of the European Union have for Walraven?
b.) Is there a promising growth of wages in the Czech Republic?
c.) What influence does the socialist system still have on the Czech workforce?
There are several environmental elements that can have an influence on doing business in the country. Besides the elements named in sub-questions a to c, there are some general economic indicators. The fast increase of the Gross Domestic Product is promising for Walraven. This means the country is getting richer and western standards can become standard in the Czech Republic too. A negative development is the increase of prices in housing, which can lead to less investments. The joining of the European Union does not cause revolutionary changes for Walraven. Possible advantages or disadvantages from the joining of the EU also apply to competitors. At the moment the wages are still much lower than in the Netherlands for example, but are increasing faster. This is the same for the wages in the construction sector, which are increasing even faster.
This is promising for Walraven. Higher wages probably increase the demand for products which save expensive time. The economy in the country can be seen as a real market economy nowadays, according to indicators by Svejnar (2002). But many employees are still working like they did in a socialist system. It will take some time before this is changed completely. Walraven has to deal with this. Overall, the environmental analysis primarily showed opportunities in the country. Several indicators showed that Czech standards are rising. A big
disadvantage is that this also applies to competitors. The increase of wages is an opportunity solely for Walraven, because they are the only company focusing on time-saving products.
2. What is the attractiveness of the market for pipe-systems in the Czech Republic?
The market for pipe-systems in the Czech Republic is still attractive. The last year the construction output, output for installations, number of dwellings started, dwellings completed and the number of installation companies and employees are increasing. The growth rate was not that high as before, but it is expected that the growth will continue for the coming years, for example due to some governmental reasons. The sum of million metres of pipes used for radiant floor heating, radiator heating and plumbing systems also increased.
3. What is the profitability of the market for pipe-systems in the Czech Republic?
At the moment the Czech market is still profitable. Probably this will not change the coming years. Already many companies are active on the market and it is not expected that many others will enter. Companies that are currently active on the market will compete. Buyers have much bargaining power, but wholesalers prefer a good relationship. When this can be established, sales can be good.
4. What is the competitiveness of Walraven’s rivalry in the Czech Republic?
a. What are the strengths of the competition that can attract customers?
b. What are the weaknesses of the competition that can be an opportunity for Walraven?
On the Czech market several companies are active. Some are known from other countries already. Koňařík is a Czech firm. Its prices are very low, but the quality of products too. Because they are Czech they have a well- known name. Koňařík sells by use of wholesalers of which Koska and Ptáček are selling Koňařík. A company already known from other countries is Hilti. They sell products directly to installers. Its products are of high quality and have higher prices. Its strongest point in the market is that they have the biggest market share (50%) and because they entered the market early, were able to create a strong sales force. Sikla is comparible with Hilti, although they are much smaller in the country. Its weakest point is that they only have five sales representatives to attend to all installers. They do not sell to wholesalers. Fischer is only competing with Walraven on some products. The innovative company is focused on anchors and plugs, which are not important products for Walraven. But the company also sells some installation products of high quality. A different Czech company is Rabovský. The advantages and disadvantages of this company are comparable with those of Koňařík. Its quality of the products is not good either, but its prices are low. Being a Czech company also is a strong point. The weak point is that the company is relatively small. They do not have as much money to spend as other competitors.
5. What is a good way for Walraven to attend to the Czech customers?
a. Is it useful to make a segmentation of the market?
b. What are the motives for buying the product?
c. Could the products be better suited to the wishes of the customers?
In the Czech Republic there are many wholesalers of which some are part of bigger wholesaler chains. The
selling products from the competitor Koňařík. A segmentation of the market is not necessary. Walraven must focus on wholesalers and should take care of the distribution of these shops. Installers prefer a nearby shop. Price and quality are the main motives for buying products. Motives for buying at a wholesaler are that the shop is nearby and that the installer has a good relationship with the wholesaler. About three fourths of the respondents know Walraven from selling its products and only a few knows the company from the internet. About 63% of the installers know Walraven from working with their products. Wholesalers name service and quality as strong points of Walraven and expensiveness as weak point. Many installers associate Walraven with ‘everything ok’.
They also associate the company with expensiveness and quality. They name the extensive assortment as strong point and expensiveness as weak point. The research did not show any unmet needs.
6. Which value proposition has a good fit with the market in the Czech Republic, in such a manner that the market position can be improved?
The discussion of the first sub-question and the different analyses conducted showed a value proposition that obviously has the best fit the current market. This is the one of operational excellence, which generates the best total cost. But for Walraven it is difficult to deliver such a value because the holding is not organised to generate that value. When this is also taken into account the value proposition of product leadership is the best to improve market position. Besides a good price, installers want products with high quality too.
7. In which way must Walraven use different marketing tools to deliver the right value to the customers?
The two formulated value propositions created two possible strategic options. Two models were developed to deliver a value to the customer. These strategies are translated into five tools: product, service, distribution, price and communication. Each of the strategies is focused on one value proposition. It became clear that it was really necessary on the Czech market to gain brand knowledge for Walraven. Two options were named, which can be used combined or seperated from the two strategies. The first option is to attend to a Czech building exhibition.
Several exhibitions are discussed. The second option is to have an e-marketing strategy. A majority of the respondents uses the internet, but almost no respondents knows Walraven from the internet.
Finally the quality strategy to generate products leadership is chosen. The company is better able to deliver this value. Using this will completely differentiates the company from competitors. Competitors are better organised to offer a low price and when Walraven is also focused on price, competitors probably react by lowering its prices, which creates a price-war.
Some recommendation for further research are done. It could be useful to have a look at the effectiveness of different marketing channels, the physical ditribution, the distribution of the sales regions and to research a way to change the mentality of wholesalers.
Table of contents
Preface 3
Management Summary 4
Table of contents 7
Part one: Introduction on research and research design
Chapter 1: Introduction of the company 11
1.1 The Walraven Holding 11
1.1.1 History 11
1.1.2 Mission Statement 12
1.1.3 Products 12
1.1.4 Organisation 13
1.2 Walraven IS s.r.o., Czech Republic 14
Chapter 2: Research design 15
2.1 Problem analysis 15
2.2 Problem definition 15
2.2.1 Research objective 16
2.2.2 Research question 17
2.2.3 Limitations 17
2.3 Sub-questions 17
2.4 Type of research 19
2.5 Data gathering 20
2.5.1 Data sources 20
2.5.2 Data collection methods 20
2.6 Structure of the thesis 22
Chapter 3: Methods and models 24
3.1 Literature review 24
3.2 Analyses 24
3.2.1 Customer analysis 25
3.2.2 Competitor analysis 26
3.2.3 Market analysis 27
3.2.4 Environmental analysis 28
3.2.5 Internal analysis 29
3.3 Value proposition 30
3.4 Delivering value proposition 31
3.4.2 Service 32
3.4.3 Distribution 33
3.4.4 Price 33
3.4.5 Communication 34
3.5 Conceptual model 35
Part two: Analyses
Chapter 4: Environmental Analysis 37
4.1 Main economical indicators 37
4.1.1 Gross Domestic Product 37
4.1.2 Inflation 38
4.1.3 Consumer prices 38
4.1.4 Industrial producer prices 38
4.1.5 (Un)employment 38
4.2 Joining the EU 38
4.3 Wages 39
4.3.1 Wages in Construction 40
4.4 Culture 41
4.5 Summary 44
Chapter 5: Market analysis 45
5.1 Attractiveness of the market 45
5.1.1 Construction output 45
5.1.2 Housing construction 47
5.2 Profitability of the market 50
5.2.1 Competition among existing firms 50
5.2.2 Potential competitors 50
5.2.3 Substitute products 51
5.2.4 Bargaining power of suppliers 51
5.2.5 Bargaining power of buyers 51
5.2.6 Combining the five forces 52
5.3 Summary 52
Chapter 6: Competitor analysis 53
6.1 Competitors 53
6.2 Market share 55
6.3 Sales in Czech Republic 56
6.3.1 Installers 56
6.3.2 Wholesalers 57
6.4 Summary 58
Chapter 7: Customer analysis 60
7.1 Wholesalers 60
7.1.1 Respondents characteristics 62
7.1.2 Knowledge about Walraven 63
7.2 Installers 64
7.2.1 Respondents characteristics 64
7.2.2 Knowledge about Walraven 65
7.2.3 Buying information 66
7.3 Summary 68
Part three: Results and conclusion
Chapter 8: Strategic choices 70
8.1 Internal analysis 70
8.2 Value proposition 71
8.2.1 Value proposition for Czech market 72
8.3 Delivering value 73
8.3.1 Czech exhibitions for the installationmarket 74
8.3.2 E-marketing 74
8.4 Pricing strategy 75
8.5 Quality strategy 78
Chapter 9: Conclusion 82
9.1 Recommendations for further research 84
Bibliography 85
Appendix 1: Map of the Czech Republic 87
Appendix 2: Questionnaire for wholesalers in English 88 Appendix 3: Questionnaire for wholesalers in Czech 91 Appendix 4: Questionnaire for installers in English 93 Appendix 5: Questionnaire for installers in Czech 96
Part One: Introduction on research and research design
• Chapter 1: Introduction of the company
• Chapter 2: Research design
• Chapter 3: Methods and models
Chapter 1: Introduction of the company
This first chapter gives an introduction on the Walraven Company, the business at which the research will take place.
1.1 Walraven Holding BV
1.1.1 History
Walraven is a family business founded in 1942 in Mijdrecht, the Netherlands. In the middle of World War II, Jan van Walraven and his two sons commenced a metalwork factory. The basis for this company was old zinc plates, which were taken from the roofs of demolished buildings. This was a good raw material in times of shortage during the war. In the beginning they made typical war-related products, like stoves and carbide lamps. After the war they had to buy pipe clamps for their own pipe fitting company, which were used to fix drainpipes. At this time they realised that they could make the pipe clamps themselves.
The company commenced producing pipe clamps in 1947. Today, this clamp is still manufactured, only on a higher quality level, however it has become one of many hundreds of innovative fixing products that leave the gates of the Walraven factories.
Research and development is an important keystone in the Walraven group. The company’s focus on research and development has led to the commercialisation of products that have changed the market and which were aimed to improve the quality, reliability and speed of fixing installations for sanitary ware, heating and climate control. The innovative character of the company has led to many patents and this will continue to be the objective for the future. It also led to development of machinery and at present most machines that are used are fully or partly designed by the Walraven Company. These production developments were a result of the Company’s focus on improving the quality of their products and efficiency of their production. The company’s internal focus on research and development allowed it to control the design and development of all these new products.
In sixty years the small metalwork factory grew via well-organised steps to its present size with more than 400 employees working all over Europe.
Milestones in Walravens history include:
- 1958 sales of pipe clamps in Belgium - 1965 sales of pipe clamps in Germany
- 1969 first participation at the international ISH exhibition in Frankfurt
- 1970 intensive approach to exporting activities, particularly to European countries - 1980 establishment of subsidiary in Belgium (sales)
- 1990 participation in Loko-Galvano (Netherlands) for production - 1991 establishment of subsidiary in former East Germany (production) - 1995 establishment of subsidiary in France (sales)
- 1997 extension of production and sales with connectors for cast-iron drainage - 1998 establishment of subsidiary in the Czech Republic (sales)
- 1999 establishment of subsidiary in UK (former Industrial Hangers Ltd.) - 2000 participation in Suchánek in Czech Republic (production)
- 2001 participation in StarQuick AG
- 2003 establishment of subsidiary in Poland (sales)
1.1.2 Mission statement
The mission statement for the Walraven Holding is:
The innovative development, manufacturing and distribution of products for HVAC-installations* (pipe fixings, pipe connectors and pre-wall systems in particular). The goal is to improve the quality of the whole installation in which these products are being used.
*= Heating, Ventilation and Air-Conditioning installations
This goal will be reached if the following are ensured:
- the customer has all relevant information concerning the products in order to make the right choice;
- the stockist is supplied correctly and in time with products which are regularly required by his customer;
- the installer has quality, time-saving products which are produced to high standards; and - the plumber has user-friendly, uncomplicated and safe products.
In order to achieve this, the company’s management has been structured in such a way that staff members are able to develop their capabilities on a continuous basis by having greater individual responsibility and thereby providing greater personal satisfaction.
To ensure quality, the basis for all the products is the ISO 9001 approval, combined with long-term partnerships with suppliers.
1.1.3 Products
Walraven has an extensive range of products. These are used for heating, ventilation, air conditioning and sanitary systems. There is also one category of products that is used in electrical installations. Roughly speaking the product range can be divided into four categories. In the first category are all products used in pipe-systems.
These are support systems and pipe connectors. This product group consists of many products which are used in all sorts of installations, like plumbing, ventilation and heating systems. The second category contains pre-wall
systems. These products are placed behind a wall for a reliable fixing of wall-hung toilets, washbasins, bidets and urinals. The third category contains products for fire protection. These include fire sleeves that prevent the spread of fire through pipe apertures. It also includes clamps that are used for sprinkler installations. Over the past few years Walraven has also produced products that are used in electrical installations. This product group contains products that are mainly used as support systems. Instead of holding pipes, they now have to support cables and other materials that are used in these installations. This is the fourth product category of the Walraven product range. The first category contains the largest product range which the company historically commenced with selling. The products in the other categories were all introduced in the last couple of years.
1.1.4 Organisation
Figure 1.1 shows how the Walraven holding is organised. All the different departments are shown. For the different production and sales locations the city of establishment is named. These are spread out over many European countries.
Marketing & sales Walraven Group
Controlling Research & Development
ICT Quality Management
Production
IHL Walraven Ltd.
(Banbury, UK)
Apack s.r.o. (Horka, CZ)
Walraven Ehrenhain GmbH (Ehrenhein, G)
J. van Walraven B.V.
(Mijdrecht, NL)
Loko Galvano B.V.
(Gramsbergen, NL), 50%
Suchánek & Walraven s.r.o (Horka, CZ), 50%
Logistics
Purchase
Logistics
Warehouse
IHL Walraven Ltd.
(Banbury, UK)
BIS Walraven GmbH (Bayreuth, G)
Walraven Sp. z o.o.
(Krakow, P)
Walraven B.V.
(Mijdrecht, NL)
Walraven IS s.r.o.
(Mlada Boleslav, CZ) Walraven BVBA
(Tienen, B)
Walraven international B.V.
1.2 Walraven IS s.r.o., Czech Republic
In this part there will be an explanation of the subsidiary of Walraven in the Czech Republic, at which the research will take place. Walraven Instalační Systémy s.r.o. (Walraven IS s.r.o.) is one of the sales offices of Walraven Holding. It is situated forty kilometres north of Prague, in Mlada Boleslav. At the moment it has thirteen employees, of which five are sales representatives. The Czech Republic is divided into five regions, in which these sales representatives are working. Each sales representative is responsible for one region, where they have their own clients. At this location there is also a small warehouse, from which the products are distributed throughout the country. The subsidiary gets much support from the Holding company. For example the supply of marketing related material.
Chapter 2: Research Design
This chapter will give an introduction on the problem field. It will also contain an overview of how the research will be done, known as the research design.
2.1 Problem analysis
During the last few decades Walraven has expanded into Europe and since 1998 the company has its own sales office in the Czech Republic. The company’s management believes the Czech market is less mature as other markets, including the Dutch market. Therefore there are still opportunities for the company to grow in the Czech market.
The products of Walraven are being sold by use of wholesalers. Rare projects, like big clamps or complicated installations, are sometimes sold directly to the installers. If a customer wants such a product they come to Walraven directly instead of asking the wholesaler first. But, to reiterate, most of the sales are done with wholesalers. These wholesalers sell the products to the installers. These are the users of the products made by Walraven. The company uses a push/pull strategy to reach both the wholesalers and the installers. They want to reach the wholesaler with actions by which the products are pushed through the channel to the wholesaler. The installers are pulled to the wholesalers with other actions. In this way Walraven is able to reach the customer as well as the user.
The Czech market has been subject to many changes in recent years. There was not a real structured wholesalers’
network, like there is in other markets. Today this is getting more and more structured. Different wholesalers are getting together to create one network. Besides this there are more changes, which are not clear at this moment.
For instance different information is known by different people in the company, but the totality of all
information is not shared across the organisation. At the moment there is also nothing done with the information.
Therefore opportunities to create new structures and plans to sell the products on the Czech market remain unrealised. However when the company’s information is structured, it will be possible to define the right value that has to be delivered to the customer. With this information in mind it should be possible to make
recommendations about the marketing strategy. With the right plans, Walraven should be able to improve its market position in the Czech Republic.
2.2 Problem definition
A problem definition is a careful reproduction of the question that has to be answered by doing the research, the reasons why this answer is of interest and the limitations (De Leeuw, 2001: 81). This will result in three components: research objective, research question and limitations.
A problem is the difference between the actual and the desired situation (De Leeuw, 2000: 280). The discomfort of the organisation with the problem to solve, leads to the research. The problem stated in this research is a reality problem (De Leeuw, 2000: 284). The company would like to invest in the problem of not having the right amount of information. The wish of Walraven to have better information about the market in the Czech
Republic, will lead to a problem definition.
There are several criteria to assess a good problem definition. These criteria are relevancy, efficiency and viability (De Leeuw, 2001: 82). Relevancy is about the objective of the research. This has especially to do with the need of knowledge. Walraven desires to have a better market position in the Czech Republic. The question has a good connection with the problems of the company. They need the knowledge of the market, to define which value has to be created and what will be the best way to deliver this value to the customers. The answer to the question will provide the company with a clear strategy to create a better market position.
The whole research is done to provide Walraven with information how to define a marketing strategy from the information gathered on the Czech market. The literature study, interviews and research in the market is done to give answer to the research question. So efficiency will also be taken into account. It is also important that the research is not restricted by too many limitations. In this research there are some, but they only structure the research and do not restrict the researcher in doing the research.
The last criterion is viability. It should be possible to do the research within the given time and resources. The research should be reachable. The researcher has all the time to do the research and employees on different departments are willing to help him. The researcher does not have other tasks, so all time could be spent in contribution to the research.
2.2.1 Research objective
The research objective is why you want to do the research (Verschuren, 1999: 33). There is a question within the organisation, which is transformed into a problem. This problem needs to be solved. The research objective in this research is defined as follows:
‘Gain better understanding of the Czech market for pipe fixing systems, in order to determine how value can be generated to the customers. In this way it should be possible to create a better market position.’
The ultimate objective is to increase sales in the Czech Republic. Of course this is what every company wants.
The first step to get to this is to have more and structured information about the market. When the company has this, it can develop a strategy to cope with it, so that finally sales can increase. The objective of this research is getting to know the market, so sales can increase.
2.2.2 Research question
The research question is about what you do the research for (Verschuren, 1999:33). What kind of information is used to reach the objective of the research? The research question in this research is formulated as follows:
´What value must be delivered to the customers and in which way, in order to create a better market position?’
An answer to the research question will hopefully generate a better market position. To obtain this it is necessary to have a well-defined marketing strategy. This marketing strategy is based on a strategic planning of the marketing activities (Leeflang, 2000). These activities will be used to describe a marketing strategy, also called strategic market management (Aaker, 2001). This is a system designed to help management both precipitate and make strategic decisions, as well as create strategic visions. A company has its right to exist by creating a superior value for their customers (Biemans, 2000: 43). By using the strategic market management, a company can create and deliver this value to their customers. They must know their customers and the market to determine which value has to be delivered to the customers. If the company is able to deliver the right value, it can have a better market position. A more detailed description of this process can be found in chapter three. This paragraph will contain a further exploration of the theory.
2.2.3 Limitations
The research is restricted by two limitations:
• The research is only focused on the Czech market.
• The only product group that is taken into account is the one which contains pipe support systems. This category provides the most sales for Walraven, especially in the market in the Czech Republic. The other product groups are not of any relevance in this research.
2.3 Sub-questions
To give a structured answer to the research question, this is split up in some manageable sub-questions. These sub-questions are formulated by use of literature and the conceptual model, which can be found in the next chapter. These sub-questions should help to give an answer to the main question. For this research some theories and models are used which create the conceptual model of the research. These were also the basis for the sub- questions. An explanation of these theories and models can be found in chapter three. If there is any indistinctness, the reader is referred to this chapter. The questions that are used in this research are:
1. Which environmental elements can have an influence on improving the market position?
a.) What kind of influences does the joining of the European Union have for Walraven?
b.) Is the growth of wages promising in the Czech Republic?
Knowing the environment of the Czech market is the starting point of the research. It could be that the country has a structure that is completely unsuitable with the business Walraven wants to do. Maybe there are specific regulations. It could also be that the communist system still has some influence on doing business in the Czech Republic. It was their culture for so long that it could be difficult to totally change this in a couple of years.
Some macro-economic indicators could also be of interest for doing business in the Czech market. Besides this the development of the wages is of vital interest for Walraven. The reason for this is that the company produces higher priced products, but these products save on installation time. So when wages are high, it is simply more interesting to buy products from Walraven.
2. What is the attractiveness of the market for pipe-fixing systems in the Czech Republic?
3. What is the profitability of the market for pipe-fixing systems in the Czech Republic?
The next two questions are about the market for pipe-systems in the Czech Republic. With these questions it should be possible to investigate what this market looks like. Is there any potential in the construction market? It is also helpful to investigate the trends on the market and the distribution systems used nowadays. Does the market has the right structure and opportunities to improve the market position? Besides this an analysis of the profitability of this market can also bring some insights about the potential business Walraven wants to do.
4. What is the competitiveness of Walraven’s rivalry in the Czech Republic?
a. What are the strengths of the competition that can attract customers?
b. What are the weaknesses of the competition that can be an opportunity for Walraven?
It is also necessary to know the competitors. In which way are they reaching the market and what are the changes for your own company to do better than them? To assess this, the company should know the strong and weak points of the competitors, and why the customers are buying their products. In that way the company is able to offer products and services which are better than those of the competitors.
5. What is a good way for Walraven to attend to the Czech customers?
a. Is it useful to make a segmentation of the market?
b. What are the motives for buying the product?
c. Can the products be better suited to the wishes of the customers?
To do some decent recommendations about how to reach the market it is off course absolutely necessary to know your customers. The first step is to know who they are and of it is possible to make a segmentation. Making a certain segmentation could prevent the company from selling to unprofitable customers. The next step is to know what their demands are. What are reasons for buying products from Walraven or from competitors. If these are known, you can deal with that and implement this in Walraven’s strategy. It could be that the customers have some unmet needs that bring some opportunities for Walraven. This is not the most important question, but if customers answer the question it can generate interesting answers.
6. Which value proposition has a good fit with the market in the Czech Republic, in such a manner that the market position can be improved?
If the first questions are answered, it must be possible to ascertain which value, that has the best fit with the Czech market, has to be delivered to the customers. The first questions show opportunities on the market which must be used by Walraven, in order to improve its market position. There is probably one value proposition that has the best fit with the Czech market.
7. In which way must Walraven use different marketing tools to deliver the right value to the customers?
If the value proposition is chosen, the way different marketing tools are used for a strategy must be determined.
These must have a fit with the value proposition. The right tools must be used to deliver the ascertained value to the customers.
2.4 Type of research
De Leeuw (2001: 72-74) distinguishes two different sorts of research within the field of business administration.
These are scientific research and practice oriented research. Scientific research is research that contributes to the general knowledge. Practice oriented research is used to develop products that contribute to the solution of specific management problems. This research can be classified as a practice oriented research.
Practice oriented research is a regulative approach, according to Van Strien (De Leeuw, 2001: 72). In order to make the research more effective, the researcher can intervene the cycle at every moment. The researcher starts with looking at the reality and observes the problem. After this he tries to find adequate problem solving tools in the knowledge base. These tools are applied to solve the problem in reality. For this research a gap in the knowledge about the Czech market is analysed. This information combined with theoretical tools is used to define a strategy to serve the clients on the Czech market.
Furthermore the practice oriented research can be subdivided in several other research methods. This research can be classified as a policy supportive practice oriented research. Policy supportive research provides information for a demonstrable client, to solve the complete knowledge need for a specific situation. In this research the client is Walraven and the knowledge about the company can be used to solve the shortage of knowledge. This could be used again to create a strategy to gain a better market position.
2.5 Data gathering
During this research the researcher will make use of several data sources and methods of data collection. These will be set out in this part.
2.5.1 Data sources
According to Saunders et al. (2003, 50) there are three categories of literature sources. These are primary, secondary and tertiary. Often primary sources are the most detailed but most difficult to obtain. Several primary literature sources will be used. To get an overview of the company, company reports are used. For the research of the market and environment reports of the Czech statistical office (www.czso.cz) and the Czech association of mechanical, electrical and plumbing contractors (www.amf.cz) will be used. Secondary sources will consist of books, journals and scientific publications that will have a contribution to the research subject. Tertiary sources are used mainly to locate other primary and secondary literature. These include search engines on the internet and the library search engine of the University of Groningen.
There are several sources that can be used to search for information (Biemans, 2000: 110):
• published sources by third groups
• their own financial administration
• market research
• interaction with customers
• strategic collaboration with customers
• feedback of customers.
These sources are especially useful when doing customer analysis. These sources are a combination of desk research and field research, see 2.5.2.
2.5.2 Data collection methods
Data can be collected in several ways. First of all you can make use of information that is already gathered, see 2.5.1. This is called desk research. It could be very helpful and fast to use information that is already gathered, although this information can be old and not accurate. If the right information is not available, you have to obtain it yourself, also called field research. According to Baarda and de Goede (1997, 136) there are two sorts of data gathering: structured and unstructured. When there is not much known about the research subject it is better to do unstructured information gathering. But if there is already something known, than a structured way of gathering information is better, because this is more accurate. Saunders et al. (2003, 282) say that these sorts can be used separately, but it is usually better to link them together. They call this a multi-method approach.
In this research both types are used. The research starts with information gathering from people of the company.
This is done unstructured, so the real problem can be found. When the research subject (i.e. the problem) is found, than the information will be gathered by use of structured questionnaires. Interviews instead of observations are used, because it is necessary to get information about knowledge and attitudes of the interviewee. Observations are more used to get frequent behaviour.
There are several ways to do field research by structured questionnaires. Structured questionnaires by telephone are preferred in this research. There are several advantages to use this type (Baarda en de Goede, 1997: 147):
• It is a fast way of data gathering
• It is an easy way of data gathering
• The results are directly ready to use
There is one big disadvantage to use these questionnaires in this research, namely the language. It could be that the installers do not speak any English or German. If that is the case, there are several options. One is that other people will do the interviews. This is not the best option because of the time it will take for other people at the company. The second option is to do a structured written questionnaire. This could be sent by computer or normal mail. The biggest disadvantage is now that the results are not directly available.
The data collection methods that are used to answer each sub-question are presented in table 2.1.
Sub Question Data Collection Method
1. Which environmental elements can have an influence on improving the market position?
- Desk research; internet, reports of statistical office and from association of plumbers a.) What kind of influences does the joining of the European
white Union have for Walraven?
- Desk research; internet, reports of statistical office and from association of plumbers b.) Is the growth of wages promising in the Czech Republic? - Desk research; internet, reports of statistical
office and from association of plumbers c.) What influence does the socialist system still have on the
make Czech workforce?
- Desk research; internet, reports of statistical office and from association of plumbers 2. What is the attractiveness of the market for pipe-fixing systems in
the Czech Republic?
- Desk research; internet, company reports, reports of statistical office and from association of plumbers
- Unstructured interviews with employees 3. What is the profitability of the market for pipe-fixing systems in
the Czech Republic?
- Desk research; internet, company reports, reports of statistical office and from association of plumbers
- Unstructured interviews with employees 4. What is the competitiveness of Walraven’s rivalry in the Czech
Republic?
- Desk research; internet, company reports - Unstructured interviews with employees and customers
a.) What are the strengths of the competition that can attract w customers?
- Desk research; internet
- Unstructured interviews with employees b.) What are the weaknesses of the competition that can be an
test opportunity for Walraven?
- Desk research; company reports
- Unstructured interviews with employees, customers and installers
5. What is a good way for Walraven to attend to the Czech customers?
- Desk research
- Structured and unstructured interviews with customers and installers
a.) Is it useful to make a segmentation of the market? - Desk research
- Structured and unstructured interviews with customers and installers
b.) What are the motives for buying the product? - Structured and unstructured interviews with customers and installers
c.) Can the products be better suited to the wishes of the make customers?
- Structured and unstructured interviews with customers and installers
6. Which value proposition has a good fit with the market in the Czech Republic, in such a manner that the market position can be improved?
- Desk research; using analyses from sources mentioned above
7. In which way must Walraven use different marketing tools to deliver the right value to the customers?
- Desk research; using analyses from sources mentioned above
Table 2.1: Data collection methods
2.6 Structure of the thesis
The research is structured in three parts, which are divided in ten chapters. In this paragraph the content of the different parts and chapters will be highlighted. The discussion of the sub-questions in the thesis will also be explained in this paragraph.
In part one, the problem definition, research approach to the research and a review of the theory are discussed.
This part is divided into three chapters, constituting the introduction on the organisation and problem, the research design and literature review. Chapter one shortly discussed the organisation for which the research is done. Chapter two of the report contains the research design. Chapter three of the report constitutes a literature review on conducting a market opportunity analysis. Furthermore a review on different models and theories that will be used is done.
Part two of the report discusses the analyses of the research and is divided into four chapters. In this part sub- questions one to five will be discussed. Chapter four starts with the analysis of the environment. In this way the research starts on a high level and every next analysis has a more detailed focus on the total Czech market. In this chapter the first sub-question will be discussed. In chapter five the market analysis will be conducted. Sub- questions two and three will be discussed in chapter five. The next chapter, chapter six, contains the analysis of the competitors in the Czech Republic and will discuss sub-question four. In the last chapter of this part, chapter seven, the customer analysis will be conducted. In this chapter sub-question five will be discussed.
The final part of the thesis, part three, discusses the results of the analyses and consist of two chapters. Chapter eight will give an overall evaluation on the market opportunities that can be found in the analysis. It will discuss the last two sub-question. A strategy for Walraven how to deal with the market will be created. Chapter nine
contains overall conclusions and implications of the research. Table 2.2 gives an overall view of the structure of the thesis.
Part 1: Introduction on research and research design Chapter 1: Introduction of the company
Chapter 2: Research design Chapter 3: Methods and models Part 2: Analyses
Chapter 4: Environmental analysis Discusses sub-question 1
Chapter 5: Market analysis Discusses sub-questions 2, 3
Chapter 6: Competitor analysis Discusses sub-question 4
Chapter 7: Customer analysis Discusses sub-question 5
Part 3: Results and conclusion
Chapter 8: Strategic choices Discusses sub-question 6, 7
Chapter 9: Conclusion
Table 2.2: Overall structure of the thesis
Chapter 3: Methods and Models
This paragraph will clarify the theories that will be used during the research. It starts with a global overview of the conceptual model. When the theories are combined, these will make up the real conceptual model. The sub- questions were also formed by making use of the theory and the conceptual model.
3.1 Literature review
The discussion of the different theories will be done by using a global conceptual model, which will be further explained later on in this chapter. Figure 3.1 presents the global model.
Figure 3.1 overview of conceptual model
A marketing strategy is based on the knowledge of the market the company wants to do business in (Biemans, 2004: 93). With use of this knowledge, a company can create a value for their customers. The practice of business marketing starts with the development of a value proposition. These will be used to make strategic choices (Biemans, 2000: 93). When the right combination of a value proposition and the way it is delivered is chosen, this can cause a better market position. The following text will explain how this exactly works. This is done by explaining the bigger blocks from the above model.
3.2 Analyses
There are several models and theories that can be used to analyse different components and create a marketing strategy. As mentioned before, knowledge of the market is necessary to create a marketing strategy. Biemans (2000) has made a model which can be used for creating a business marketing strategy. This model is partly used in this research. He divides the analyses in customer analysis, supplier analysis and competitor analysis. In this research the analysis about the suppliers is not done. This is because the products, at which this research is focused, are all made by Walraven themselves. They only make use of suppliers for raw materials, like steel and rubber. Besides that, the research is focused on the sales office in the Czech Republic. They only receive products from within the organisation. For selling the products they do not make use of any other external supplier. Because the market in the Czech Republic is relatively new, it is also useful to have some more analyses about this market and about some other environment factors. These factors, for example, define the attractiveness of the market and can also show in which growth phase the market is at this moment. Biemans does not take these factors into account, but there are other authors who describe how to do these sorts of market research.
Shortage of knowledge
Bad market
position Analyses Value
proposition Better market
position Delivering value
proposition
Two authors that use these more detailed analyses are Alsem (2001) and Aaker (2001). The structures they use are almost the same. They both perform external and internal analyses. These analyses are the basis for formulating the strategy. Aaker starts the research with an external analysis and Alsem starts with an internal analysis. The external analysis of both authors differs slightly. Both authors distinguish a customer analysis, competitor analysis, market analysis and environmental analysis. The external analysis of Alsem also contains a distribution channel analysis. In the model of Aaker the distribution channel is part of the market analysis. In this research the distribution channel analysis is partly done in the customer analysis. Walraven uses wholesalers for selling their products. These wholesalers are therefore the customers of the company. They also provide a part of the distribution. When doing recommendations about the strategy to follow, the distribution is also taken into account.
The starting point of the two models also differs. According to Alsem (2001: 65), the analyses cannot be done without proper market delimitation. In this research the market is already limited to the geographic market of the Czech Republic. A second limitation is that not all the products are taken into account, but only the products for pipe systems.
Another big difference between these authors is not in the structure of the analysis, but in the way they are carried out. Aaker is especially focused on the subjects that have to be taken into account in the different analyses and Alsem is focused more on methods how to perform the analyses.
In this research is chosen to use some aspects of the model of Aaker. This model shows in a well-organised way, how a company can choose a marketing strategy. Using this model, the researcher is free to use it the way he wants. The model of Alsem contains more methods already, in which the researcher is not able to choose anymore. The aspects of the model of Aaker can more easily be fitted with the model of Biemans, which is the basis for the research. These choices provide analyses of the following factors.
3.2.1 Customer analysis
The most important information a company needs for formulating and carrying out a marketing strategy is information about customers (Biemans, 2000: 109). An analysis of the customers exists of identifying the different segments, an analysis of customer motivations and an exploration of unmet needs (Aaker, 2001: 42).
First it is useful to see if it is possible to segment the market. At this moment this is not done. However it could be that the customers differ in some objects. It could be that the market cannot be seen as one and that it is better to divide the customers into different segments. One segment may want another value than the other segment, or one segment could be more profitable than the other, so focusing on one group can be better. This is often the key to developing a sustainable competitive advantage (Aaker, 2001: 42). First it must be identified if there are any differences between the customers and that they can be segmented. Thereafter a segmentation on different approaches can be made.
